The prospect of an impending labor strike at an Australian liquefied natural gas (LNG) facility has sparked a notable increase in wholesale gas prices across Europe. The Offshore Alliance trade union has cautioned that a potential strike at the North West Shelf establishment could commence by September 2nd if wage disputes remain unresolved.
Gas price benchmarks in the European Union (EU) and the United Kingdom (UK) observed a roughly 10% surge on Monday, as reported by Bloomberg. Although prices had surged following Russia’s intervention in Ukraine, they have since receded.
Growing concerns revolve around the potential impact of strike action at the North West Shelf facility, overseen by Woodside Energy Group. This facility plays a pivotal role in Australia’s supply of LNG to global markets.
Simultaneously, employees at two auxiliary offshore LNG plants—Gorgon and Wheatstone, both under Chevron’s ownership—are currently voting on the possibility of joining a strike, with results expected on Thursday. Collectively, these three facilities account for around 10% of the global LNG supply.
Ben McWilliams, affiliated with the Bruegel think tank, has expressed concerns about the international repercussions of these strikes on LNG prices. McWilliams highlighted that these disruptions could prompt Asian consumers, traditionally served by Australia, to explore alternatives such as Qatar, potentially leading to competition with European buyers.
McWilliams emphasized that such a scenario might trigger price fluctuations across various markets.
Post Russia’s Ukraine conflict, gas supplies from Russia to Europe diminished, prompting nations to diversify their energy sources. LNG emerged as a crucial solution.
Australia, along with Qatar and the United States, is a prominent global LNG exporter. Recent forecasts suggest that uncertainties related to Australian gas supply could contribute to a substantial increase in the Ofgem price cap in January, potentially reaching £2,082.56 for a standard annual household energy bill in Q1 2024, up from the Q4 2023 projection of £1,925.71.
In summary, the potential strike threat at an Australian LNG facility has triggered a surge in gas prices in Europe. This, combined with the possibility of strikes at other significant LNG plants, has the potential to reshape the global LNG market and impact prices in diverse regions. As energy supply dynamics evolve, monitoring the implications of these labor-related conflicts is crucial.